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Gary & Co Ratio Analysis & Cost of Trade Credit

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1. Given the following data for Gary and Co (Millions of Dollars)

Balance Sheet Dec 31 200X

Cash $ 45
Accounts Payables $ 45
Marketable Securities 33
Notes Payables 45
Receivables 66
Other Current liabilities 21
Inventory 159
Total Current liabilities $111
Total Current Assets 303
Long term debt 24
Total liabilities $135
Net Fixed Assets 147
Common Stock 114
Total Assets $450
Retained Earnings 201
Total stockholders' equity 315
Total liabilities and equity 450

Income Statement Year 200X

Net sales $795
Cost of goods sold 660
Gross profit 135
Selling expenses 73.5
Depreciation 12
EBIT 49.5
Interest expense 4.5
EBT 45
Taxes (40% 18
Net Income 27

Calculate the following ratios:

Current ratio
Times interest earned
Inventory Turnover
Sales/Total Assets
Profit margin on sales
Return on Total Assets
Return on Common Equity

Hint: Use Net Sales of $795.
Days sales out is also called Days Sales Uncollected.

Show the formulas and numbers used in the calculations. Show calculations/formulas

2. Calculate the cost of trade credit given terms of 3/20 net 60
When performing this calculation why not use the number 100. Make sure to show the formula. Show calculations by hand as well.

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Solution Summary

The solution computes various accounting ratio's for Gary & Co and also find out cost of trade credit in another example.

Solution Preview

See the attached sheet for calculations.

Current Ratio = Total Current Assets/Total Currrent ...

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